The official blog of Illinois Issues magazine,
published by the Center for State Policy and Leadership
at the University of Illinois Springfield

Thursday, May 30, 2013

Competing plans for pension changes are at a standoff

By Jamey Dunn

Shortly after the Illinois House approved a shift of future pension costs to universities and community colleges, the Senate voted down House Speaker Michael Madigan’s pension reform bill.

With only one day left until the scheduled adjournment of the General Assembly's spring session, it is beginning to seem like a real possibility that Senate Bill 1687, a cost shift agreed to by the universities and community colleges, may be the only movement on pensions this session.

Senate Bill 1687 would shift the cost of employee pension benefits going forward to public universities and community colleges. The shift would start in 2015 and be phased in at a rate of .5 percent of payroll each year. “Every other employer in the country, as they are setting wages and benefits, have to take into account the entire cost of that package from the actual salaries to any retirement and health care packages as well,” said Rep. Elaine Nekritz, who sponsors the bill. Nekritz said that if employee benefits remain the same, the phase in would take about 18 years. “These are people that have never been employees of the state of Illinois,” she said.

In return for their agreement on the cost shift, universities and colleges would get veto power over any pension benefit upgrades approved by the legislature in the future. The bill also loosens some procurement requirements for the institutions. “We fight for our rights and our priorities as local units of government. But we can’t do that unless we are also willing to accept the responsibilities of local units of government,” said Tom Ryder, legislative counsel for the Illinois Community College Trustees Association. But he warned that the issue would likely have to be revisited in the future. “For the next 30 years, there will be some things that will happen that none of us will foresee.”

Nekritz called the bill “part of a comprehensive pension reform effort that’s going on in the Capitol this year.”

But Republicans on the House floor voiced concerns that it may be the only change to the pension systems that is approved this session. “This chamber and the chamber across the way have not found a way to close the deal on pension reform. We talked a good game. We send a bill over; they send a bill over. But today, 24 hours to adjournment, we have not done pension reform in a final way that sends it to the governor’s desk,” said House Republican Leader Tom Cross.

Opponents to the cost shift complained that it would lead to tuition hikes and property tax increases. “This is not a free lunch. Taxpayers pay for tuition, and the taxpayers will pay for the property tax increases that can occur here,” Naperville Republican Rep. Darlene Senger said. “If this bill passes, tomorrow morning you are going to have to bond houses looking at our universities and downgrading their bonds.” Sanger said that changes to benefits should come before a cost shift, so schools can be sure of what they are signing onto.

“We’re working on it. I don’t know how to predict that right now,” Nekritz said about trying to find a compromise on overall pension changes. Nekritz and Madigan also hope to work out a similar cost shift deal with K-12 schools outside of Chicago, which pays for most of its own pension costs. But she acknowledged that the negotiations, with many districts and local interests coming into play, would be more difficult.

After the House approved the cost shift, the Senate soundly rejected Senate Bill 1, the comprehensive pension benefit changes approved by the House, on a 16 to 42 floor vote.
Meanwhile Senate President John Cullerton’s preferred plan, SB 2404, which has union backing, languishes in that infamous bill graveyard, the House Rules Committee.
“I don’t think there’s interest in the House in moving that bill,” said Madigan spokesman Steve Brown.

Supporters of Cullerton’s plan say that model, which offers employees a choice in their benefits reduction, is constitutional. Backers of SB 1 say Cullerton’s plan would not save enough to stabilize the system, which has an estimated $100 billion unfunded liability.

After the Senate vote, Madigan's and Cullerton's camps traded barbs through the press, and Gov. Pat Quinn stomped his feet. Madigan told the Chicago Sun-Times that the Senate vote showed “a lack of leadership.”
Rikeesha Phelon, a Cullerton spokeswoman, said in response “The speaker and President Cullerton have different leadership styles. Let's leave it at that.”

Quinn released a statement scolding the Senate. “The people of Illinois were let down tonight. Every lawmaker in the Capitol knows what needs to be done. Senate Bill 1 is comprehensive public pension reform. It has already passed the House of Representatives, and it should pass the Senate, too.”

Madigan said he was heading to the Executive Mansion tonight. Brown noted that some progress has been made. He said the pension problem took 40 years to create, and “I don’t think that anybody expects it to be solved overnight.”

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The bureau follows state government from the Capitol Press Room and writes articles for Illinois Issues magazine, published by the Center for State Policy and Leadership at the University of Illinois at Springfield.
Contact: illinois.issues@gmail.com